Mongolia Energy Corporation Limited · HKEX:276
Mongolia Energy — Investor Presentation (July 2009)
52 slides from Mongolia Energy's investor presentation, July 2009
Slide 1: Mongolia Energy Corporation Corporate Presentation
Mongolia Energy Corporation (Stock code: 276) Corporate Presentation July 2009 ENERGY RESOURCES DEVELOPER
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements that involve risks and uncertainties and intended to be covered by applicable safe harbor principles under applicable national and federal securities legislations. These statements are generally indicated by the use of forward-looking
Slide 3: About MEC
About MEC FOCUSED. PROFESSIONAL. REALISTS. MEC’s business model is to acquire concessions and to put in place a strong in-house team, including industry veterans in the geological, mining and legal areas to lead exploration, development and compliance aspects relating to the concessions. In this sen
Slide 4: Vision and Value
Vision and Value Our Vision is to develop MEC into a leading energy company in the energy and related resources sector with a global brand recognition. Our Value lies in implementing our projects in a sustainable manner, paying due care to the environment and the partnership with the peoples where w
Slide 5: Board and Management
Board and Management Simon Lo – Chairman Over 20 years of experience in the financial, securities and futures industries, including many trans- border transactions Served on the Board of Directors of a number of listed companies Identified and secured the resources projects for the company actively
Slide 6: Board and Management
Board and Management Gordon Poon – Director of Corporate Development & Investor Relations Over 20 years' experience in investment banking Worked as senior management in corporate finance and capital markets trading and sales in London, North America, Tokyo and Hong Kong for leading houses, including
Slide 7: Share Related Data
Share Related Data Shareholding Structure (As of June 30, 2009) 0.12% Other directors 16.95% Liu Cheng Lin 63.08% Public* 19.85% Lo Lin Shing, Simon *Note: Based on the information on HKEX website, Dató Dr. Cheng Yu Tung has 3.72% interest and Dr. Cheng Kar Shun, Henry has 6.34% interest in MEC. Lis
Slide 8: Our Core Business
Our Core Business Coal Oil & Gas Minerals 8
Slide 9: Our Projects (2007)
Our Projects 2007 Jan May Dec COAL – COAL & MINERALS – OIL & GAS – WESTERN MONGOLIA WESTERN MONGOLIA WESTERN MONGOLIA First Acquisition Second Acquisition Third Acquisition 34,000 hectares of coal 32,000 hectares of coal, 20% consortium member concessions in Khushuut ferrous and non-ferrous over 487
Slide 10: Our Projects (2008)
Our Projects 2008 Mar May Sep Sep MINERALS – COAL & MINERALS – COAL & OTHERS – OIL & GAS – XINJIANG, CHINA WESTERN MONGOLIA XINJIANG, CHINA SOUTHERN MONGOLIA Fourth Acquisition Fifth Acquisition Sixth Acquisition Seventh Acquisition 20% interest of multi- 263,008 hectares of coal, Acquired 25% of a
Slide 11: Khushuut Coking Coal Mine Project
KHUSHUUT COKING COAL MINE PROJECT 11
Slide 12: Our Projects in Western Mongolia
Our Projects in Western Mongolia Western Mongolia Concessions – Coal, Ferrous & Non-ferrous Metals Beijing Xinjiang First Acquisition Second Acquisition Fifth Acquisition 12
Slide 13: Khushuut Coking Coal Mine Project
Khushuut Coking Coal Mine Project MEC has been actively working on exploration of resources and planning of the Khushuut Coking Coal Mine in Khovd Province, western Mongolia throughout 2007 and 2008 600 hectares of the coal mine areas in Khushuut has been explored so far, out of the 330,000 hectares
Slide 14: Professional Partners: John T Boyd Company
Khushuut Coking Coal Mine Project Professional Partners John T Boyd Company Independent Technical Advisor Over 60 years of expertise in completing reserves audits and stock listing requirements for coal companies Conducted more than 2,000 reserves audits, including audits for some of the largest coa
Slide 15: Professional Partners: Fenwei Energy Group
Khushuut Coking Coal Mine Project Professional Partners Fenwei Energy Group Mining Operations Consultant Fenwei Energy Group is one of the premier energy consulting companies with a high degree of expertise and experience in China’s coal industry The scope of services range from field investigations
Slide 16: Professional Partners: China Coal Geology Exploration Team
Khushuut Coking Coal Mine Project Professional Partners China Coal Geology 129 Exploration Team Exploration Company Team 129 is an experienced exploration team under China Coal Geology’s No. 1 Exploration Bureau It provides drilling and other aspects of the exploration with the advice of John T. Boy
Slide 17: Professional Partners: Mr. K. T. Mao, Hysen
Khushuut Coking Coal Mine Project Professional Partners Mr. K. T. Mao Hysen International Inc. – Project Management President of Hysen International Inc. Actively engaged in coal trading, coal consulting and investment advisory services in Beijing in the past six years For nearly 20 years, he was Wo
Slide 18: Resources Exploration
Khushuut Coking Coal Mine Project Resources Exploration 2007 Exploration drilling by Team 129 included 199 drill holes with a cumulative depth of over 50,000 meters Resources were estimated at 460 million tonnes according to Chinese standards by Team 129 MEC utilized the services of John T. Boyd Com
Slide 19: Resources Exploration
Khushuut Coking Coal Mine Project Resources Exploration BOYD prepared an independent resource estimate in accordance with international JORC Standards for two major seams: Million Tonnes C Seam 101.7 B Seam 47.5 Total 149.2 Resources are surface minable 19
Slide 20: Resources Exploration
Khushuut Coking Coal Mine Project Resources Exploration During 2008 additional 42 holes were drilled (in excess of 7,000 meters) Analyses are pending Resource estimates will be updated to reflect the additional data 20
Slide 21: Market Analysis
Khushuut Coking Coal Mine Project Market Analysis MEC commissioned the services of Shanxi Fenwei Energy Consulting Co. Ltd. to complete detailed “Market Study of Khushuut’s Coal Resources” Results affirm favorable market conditions for the high quality Khushuut Mine coking coal 21
Slide 22: Market Analysis
Khushuut Coking Coal Mine Project Market Analysis Fenwei’s conclusions relative to the Xinjiang Market and potential for Khushuut coking coal: “We believe with a moderate to high degree of confidence that the Khushuut coking coal can be profitably developed for the Xinjiang market.” “Xinjiang is lac
Slide 23: Market Analysis: Coal Pricing
Khushuut Coking Coal Mine Project Market Analysis Coal Pricing: Fenwei evaluated market conditions and coal pricing for the Khushuut Coking Coal delivered to customers in Xinjiang Autonomous Region, PRC Estimated Delivered Market Prices RMB/Tonne as of Coking Coal Jan 2009 Nov 2008 Aug 2008 Grade 1
Slide 24: Market Analysis: Future Market Prices
Khushuut Coking Coal Mine Project Market Analysis Fenwei’s calculation of future market prices (Coking coal delivered to Xinjiang): Demand increases and escalating price expected to resume in second half 2009 Market prices for coking coal expected to escalate for the next 15 years - Moderate degree
Slide 25: Xinjiang Coking Coal Demand
Khushuut Coking Coal Mine Project Market Analysis Xinjiang Coking Coal Demand Demand for coking coal for the major steel producers in Xinjiang is projected to increase from 7.4 million tonnes in 2007 to 15.8 million tonnes by 2010 20 Million Metric Tonnes 15 8.1 10 4.92 4.62 5 4.46 7.88 7.7 5.18 2.9
Slide 26: Market Analysis: Xinjiang Bayi Iron & Steel
Khushuut Coking Coal Mine Project Market Analysis Xinjiang Bayi Iron & Steel Co., Ltd. (“Bayi Steel”) Two new coking plants increase coking coal demand by 4.76 million tonnes per annum (from 2.94 million tonnes per annum (2007) to 7.7 million tonnes per annum (2010)) In 2006 and 2007 imported approx
Slide 27: Market Analysis: Xinjiang Hongji Coke
Khushuut Coking Coal Mine Project Market Analysis Xinjiang Hongji Coke Corporation Ltd. (“Hongji”) Two additional tamping coke ovens to come on line resulting in increased coking coal requirements by 2010 New plants will more than double current capacity resulting in a total 3.6 million tonnes per a
Slide 28: Market Analysis: Xinjiang International Coal and Coking
Khushuut Coking Coal Mine Project Market Analysis Xinjiang International Coal and Coking Corporation Ltd. (“XICC”) Current coke production capacity is 1 million tonne per annum Actual operating capacity (2007) was 370,000 tonnes coke due to poor quality coking coal and lack of premium quality coking
Slide 29: Transportation
Khushuut Coking Coal Mine Project Transportation Khushuut’s coal will cross into Xinjiang at the Yarant Border Crossing MEC started construction of the Khushuut Road in 2008 As of November, substantial construction of 243 kilometers of road foundation work has been completed Completion of road found
Slide 30: Mine Planning
Khushuut Coking Coal Mine Project Mine Planning A draft mine pre-feasibility study has been completed by Boyd Detailed mine plans for the design and construction of a 3.0 million tonnes per annum open-cut coal mine has been initiated under the supervision of Mr. K. T. Mao of Hysen as MEC’s Khushuut
Slide 31: Plans for 2009
Khushuut Coking Coal Mine Project Plans for 2009 Khushuut Mine planning and implementation Continue road upgrading Environmental and hydrological studies Western Mongolia Reconnaissance exploration for coal, ferrous and non-ferrous metals –2008 Reconnaissance identified possible sites for copper and
Slide 32: Appendix
APPENDIX 32
Slide 33: Coal Classification
Coal Classification Coal is generally classified into 2 types: Low Rank Coal (Thermal Coal) Soft, dull & high moisture Used for generating electricity Less scarce & lower economic value Hard Coal (Coking Coal) Higher carbon content, lower moisture & impurities Used for iron & steel manufacturing Rel
Slide 34: What is Coking Coal?
What is Coking Coal? carbon/energy content of coal high high moisture content of coal Low rank coal (47%) Hard coal (52%) Lignite Sub-bituminous Bituminous Anthracite Thermal coal Coking coal used for heating used for metallurgy Electricity generation, Household / Mainly used in Iron and steel cemen
Slide 35: Supply of Coking Coal in China
Supply of Coking Coal in China Coking coal represents only around 27.7% of total coal reserves in China 3.5% 0.6% 4% Fat coal Other coking coals Lean coal 5.8% Hard coking coal 13.8% Gas coal 72.3% Non-coking coal Coal reserve distribution by types Source: China Coal Resources Net 35
Slide 36: Supply of Coking Coal in China
Supply of Coking Coal in China Over 50% reserves and 30% production are located in Shanxi Coking coal reserve distribution in China Coke production by provinces (2007) Area Percentage Area Percentage Shanxi 50.1% Shanxi 30% Hebei 11% Anhui 9.8% Shandong 8% Guizhou 5.9% Henan 6% Shandong 4.6% Liaonin
Slide 37: Supply of Coking Coal in China
Supply of Coking Coal in China Coking coal production volume is smaller than other type of coals, represents only around 7-13% of total coal production Coke vs. total coal production 3,000 14% 12% Production volume (m tonnes) 2,500 10% Coke as % of total (%) 2,000 8% 1,500 6% 1,000 4% 500 2% 0 0% 19
Slide 38: Supply of Coking Coal in China
Supply of Coking Coal in China Tight & Limited: Reserve scarcity Safety inspection & small mines closure (from 2,600 to 1,000 by 2011) by Chinese government could lead to a supply restriction from Shanxi 38
Slide 39: Demand of Coking Coal in China
Demand of Coking Coal in China Large & Increasing: China is the world’s largest steel producing country, accounting for 37.6% of total world production in 2008 (Source: World Steel Association) “Go west policy” drives up demand related to infrastructure upgrade & construction works in China 39
Slide 40: Demand of Coking Coal in China
Demand of Coking Coal in China RMB 4 trillion stimulus package on heavy industry (around 82% of the amount is related to infrastructure & construction works) by Chinese government for achieving China’s 8% GDP growth target e.g. “steel industry revitalization" in Jan 2009 Medical and healthcare, educ
Slide 41: Demand of Coking Coal in China
Demand of Coking Coal in China China Coking Coal’s Import: Since 2007, the growth of demand for coking coal’s import has resumed Since 2006 Mongolia has replaced Australia as the largest coking coal importer Tonnes in thousands 2002 2003 2004 2005 2006 2007 2008 Q12009 Mongolia 2,078 2,154 3,119 3,6
Slide 42: Demand of Coking Coal in China
Demand of Coking Coal in China Tax Policy: Since Nov 1, 2006. an export tax of 5% is levied on coking coal to which the government assigned a label of “rare resources” Since Jan 1, 2006. coking coal’s import tax is abolished, this reflects a strong and growing demand for scarce resources 42
Slide 43: Financial Highlights
Financial Highlights For the six months ended September 30 For the year ended March 31 2008 2008 2007 Turnover 10.5* 30.0 39.8 (HK$ million) (Loss) Profit Attributable (185.6) 74.4 11.8 to Shareholders (HK$ million) (Loss) Earnings Per (3.07) 2.32 0.62 Share – Basic (HK cents) * The aggregate turnov
Slide 44: Financial Highlights
Financial Highlights As of September 30 As of March 31 2008 2008 2007 Cash & Cash Equivalents 1,518.7 254.3 67.7 (HK$ million) Total Borrowings 1,812.8 997.0 126.8 (HK$ million) NAV 13,549.3 13,095.1 641.4 (HK$ million) NAV / Share HK$2.24 HK$2.17 HK$0.25 Current Ratio 10.58 2.09 1.67 Gearing Ratio
Slide 45: Corporate Social Responsibilities
Corporate Social Responsibilities Social • Building of shower facilities in 4 soums • Developing water supply for Khushuut and nearby areas • Improving medicine reserve in hospitals • Constructing bank building with Khaan Bank • Constructing police building to enable full time local police presence
Slide 46: About Mongolia
About Mongolia Mongolia is a democratic country that celebrates more than 800 years of history. It has an area of around 1.6 million sq km, abundant in natural resources, and a population of around 2.8 million that attains a 98% literacy. Other than Mongolian, English, Russian, Korean and Chinese ar
Slide 47: Industry Overview: Coal
Industry Overview Coal Coal Production and Consumption (1997 & 2007) Source: BP Statistical Review of Energy 2008 47
Slide 48: Industry Overview: Coal Prices
Industry Overview Coal Coal Prices (1991 – 2007) Prices Northw est US Central Japan coking Japan steam Europe Appalachian coal coal import coal import US dollars per tonne marker price* spot price index** cif price cif price 1991 42.80 29.01 60.45 50.30 1992 38.53 28.53 57.82 48.45 1993 33.68 29.85
Slide 49: Industry Overview: Crude Oil Prices
Industry Overview Oil and Gas Crude Oil Prices (1961 - 2007) Source: BP Statistical Review of Energy 2008 49
Slide 50: Industry Overview: Oil and Gas Consumption
Industry Overview Oil and Gas Consumption by Region (2007) Source: BP Statistical Review of Energy 2008 50
Slide 51: Industry Overview: Oil and Gas Imports and Exports
Industry Overview Oil and Gas Imports and Exports (2007) Source: BP Statistical Review of Energy 2008 51
Slide 52: Thank You
THANK YOU Investor Relations Contact: Ms. Jasmine Lau Investor Relations Manager 40th Floor, New World Tower 1, 16-18 Queen's Road, Central, Hong Kong Tel: (852) 2138-8000 Fax: (852) 2138-8111 Email: ir@mongolia-energy.com Website: www.mongolia-energy.com 52